Speaking at the GHL Mortgage Event, Simon Read, head of business development for Victoria, said that with so many lenders moving into the non-conforming market, fierce competition would inevitably cause casualties, but added margins were reducing quickly and small lenders would benefit from having far lower running costs.
He said: “I personally think the new lenders will have a big share of the market. Competition is driven by innovation. Affordability is in greater demand and nearly all new lenders are moving straight into it, while technology is cutting costs. Smaller lenders have learnt from bigger ones and that is why the market is moving on. Lenders are slimming down. The cost base is low as a smaller lender, while bigger lenders are cost heavy.”
However, Colin Snowdon, chief executive of Freedom Lending, said the size of a lender wasn’t the issue. “Being owned by a major organisation does give certain advantages. But what’s much more important is a management that understands the market and everything involved in running a lender. The market is big enough for new lenders to be coming through. It’s a dynamic market, so there’s always going to be consolidation. But as long as there are people who understand the market and can spot a niche, and people who want to invest, there will always be small and new mortgage lenders.”
Mark Chilton, managing director of Purely Mortgages, added: “All lenders are thinking about branching out into non-conforming. But at the end of the day, a lot of larger lenders will have funding advantages, as many small lenders are self-funding. Size buys lower running costs. The bigger the volumes a lender does, the lower the costs.”
